Stock market today: Nifty 50, Sensex resume their slide; 5 key factors that weighed on Indian stock market sentiment

Stock market today: Indian stock market benchmarks—the Nifty 50 and the Sensex—resumed their downward march on Thursday, August 8, failing to hold onto the solid gains from the previous session.

The Nifty 50 closed with a loss of 181 points, or 0.74 per cent, at 24,117, while the Sensex settled at 78,886.22, down 582 points, or 0.73 per cent.

The mid and small-cap indices on the BSE also fell, but they still outperformed the benchmarks, as their decline was less severe than that of the benchmark Sensex.

The BSE Midcap index fell 0.44 per cent, while the Smallcap index declined 0.16 per cent.

The overall market capitalisation of BSE-listed firms dropped to nearly ₹445.8 lakh crore from nearly ₹448.6 lakh crore in the previous session, making investors poorer by about ₹3 lakh crore in a single session.

As many as 41 stocks fell in the Nifty 50 index.

Shares of LTIMindtree (down 4.09 per cent), Grasim (down 3.60 per cent) and Asian Paints (down 3.37 per cent) ended as the top losers in the Nifty 50 index.

On the other hand, shares of Tata Motors (up 1.63 per cent), HDFC Life (up 1.57 per cent) and SBI Life (up 1.22 per cent) ended as the top gainers in the index.

Among the sectoral indices, Nifty IT (down 1.90 per cent), Metal (down 1.74 per cent), Oil & Gas (down 1.32 per cent), Realty (down 1.21 per cent), Consumer Durables (down 0.83 per cent) and PSU Bank (down 0.78 per cent) ended as the top losers. Nifty Bank closed almost flat.

The Indian stock market has been under pressure in August so far. The Nifty 50 is down over 3 per cent this month after two consecutive months of gains. The index is about 4 per cent down from its all-time high of 25,078.30 hit on August 1.

5 key factors that weighed on Indian stock market sentiment

Experts identify five key reasons that weighed on the Indian stock market sentiment:

Valuations concerns

Despite the recent correction in the market, valuations are still high. According to Bloomberg data, the current PE (price-to-earnings) ratio of the Nifty 50 is around 23.8, above its one-year forward PE of 20.2. The current PB (price-to-book) ratio at 3.92 is also above the one-year forward PB of 3.14.

While large-cap valuations may not be at alarming levels, market participants remain cautious, fearing that any negative trigger could lead to a deeper correction. This cautious sentiment among investors is keeping the market subdued.

Weak global cues

Weak global cues are dampening domestic market sentiment, as investors worry that a US economic slowdown could have significant global repercussions. Investors' risk appetites have been low after the weaker-than-expected July employment numbers. On Thursday, major European markets fell about a per cent during the session as traders waited for US weekly jobless claims data.

Even though experts say that it is early to assume that the US economy will fall in recession soon, there agree that there are some signs of weakness.

"The global market is focusing on US job data, and the probability for deeper slowdown has raised concerns that the US economy is heading for a recession, forcing the Federal Reserve to cut rates faster than initially expected," said Vinod Nair, Head of Research, Geojit Financial Services.

RBI's cautious tone on growth, inflation

The Reserve Bank of India maintained a status quo on policy rates and stance on Thursday, in line with expectations, and maintained its inflation and growth forecast for the current financial year FY25.

The central bank, however, highlighted the concerns over elevated food inflation.

RBI maintained its CPI (Consumer Price Index)-based inflation projection for FY25 at 4.5 per cent. However, there have been some changes in the inflation forecast across different quarters. Q2 FY25 forecast is now 4.4 per cent from 3.8 per cent earlier, Q3 forecast is now 4.7 per cent from 4.6 per cent, and Q4 forecast is now 4.3 per cent from 4.5 per cent earlier. The forecast for Q1FY26 is 4.4 per cent.

Moreover, RBI retained its real GDP growth forecast for FY25 to 7.2 per cent, with Q1 at 7.1 per cent, slightly down from the earlier projection of 7.3 per cent.

"The domestic market reversed its earlier gains as the RBI's decision to hold its current policy with caution to revise the CPI upward and moderate the growth forecast for Q1," said Nair.

Geopolitical tensions

Geopolitical uncertainty is also affecting market sentiment. While tensions between Israel and Hamas continue to escalate, India is also facing concerns over unrest in neighbouring Bangladesh.

“There is a lot of uncertainty in global markets with regards to fears of a recession in the US and the rising tension in the Middle East, which is prompting investors to cut down their long bullish bets in local equities as well. While markets may remain volatile in the near to medium term, investors will continue to look at global indices for cues,” said Prashanth Tapse, Senior VP (Research), Mehta Equities.

Technical factors

Shrikant Chouhan, the head of equity research at Kotak Securities, underscored that the Indian stock market has been consistently facing selling pressure at higher levels. A bearish candle on daily charts and double top formation on intraday charts indicate further weakness from the current levels.

"For the day traders, the intraday texture is non-directional; hence level based trading would be the ideal strategy," said Chouhan.

"For Nifty/Sensex, 24,100/78,800 and 24,250/79,300 are the important levels to watch out for. Above 24,250/79,300, the market could move up to 24,350-24,400/79,700-80,000. On the flip side, below 24,100/78,800, selling pressure is likely to accelerate. Below this, the market could slip to 24,000-23,925/78,500-78,250," Chouhan said.

Jatin Gedia, a technical research analyst at Sharekhan by BNP Paribas, pointed out that pullback rallies towards the resistance levels are being sold into.

"The hourly momentum indicator has completed its pullback to the equilibrium line and started a new cycle on the downside. Thus, we can expect the weakness to continue. On the downside, 23,900 is the crucial support and immediate target," said Gedia.

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